Offsetting the Tariff Wars with a Flexible, Tech-Enabled Supply Chain
Posted by Ranga Bodla, Head of Industry Marketing
Manufacturers, distributors and retailers can leverage technology to help adapt to a business environment where tariffs and trade wars are making daily headlines.
Tariffs, the taxes that are levied on the imports and exports that move between sovereign states, have been around for more than 200 years but are gaining newfound attention in the current political climate.
A hot button topic for manufacturers, distributors and retailers alike, the current tariff wars are driving many organizations to rethink the way they align and maximize their global supply chains. Just this year, for example, the US has imposed tariffs on steel, aluminum and $34 billion in Chinese products—a move that prompted a retaliatory tax on U.S. products from China, Canada and the European Union.
In addition to the 25 percent tariff on imported steel and 10 percent tariff on imported aluminum, there is also a proposed 25 percent tariff on automobile imports (including cars, trucks, and vehicle parts).
These tariffs, and the retaliatory steps that other countries are taking (the steel and aluminum tariffs prompted Mexico to place a 25 percent tariff on cheese, steel and Tennessee whiskey), are pushing companies to rethink the way they structure and orchestrate their supply chains.
Cause for Concern
Not to be overshadowed by high-profile examples like Harley-Davidson, Caterpillar and General Motors—all of which have voiced concerns about tariffs cutting into profits and forcing them to raise consumer prices—a wide swath of manufacturers, distributors and retailers either are, or soon will be, grappling with these issues.
But here’s the good news: technology is a great facilitator for organizations impacted by the tariff wars and that want to do something about it.
Whether they want to source their raw materials from a different country, move some operations overseas, or explore the use of alternative materials that aren’t impacted by tariffs, companies can effectively use technology to work across multiple continents, time zones and countries.
4 Ways Technology Can Save the Day
Managing the modern-day supply chain requires attention to detail and a level of transparency that can only be achieved by using a holistic supply chain platform. By generating the data and insights used for sound decision-making, cloud-based systems like NetSuite are helping companies avoid excessive import/export fees and shore up their bottom lines. Here’s how:
- Find new countries to source raw materials from. With tariffs threatening to take a bite out of their bottom lines, manufacturers need global visibility across their entire supply chains to be able to answer questions like: Exactly where are our raw materials originating from? How are those products (and the materials that go into those products) impacted by the volatile tariff environment? And, what other sources of supply exist (outside of the realm of the tariff wars)? With the right technology platform in place, manufacturers can quickly get the answers to these and other questions and then use those insights to make quick supply chain shifts.
- Relocate some operations overseas. With companies like Harley-Davidson threatening to move a portion of their operations overseas in order to avoid import tariffs, the offshoring trend is beginning to pick up steam again. The question is, what are the best geographic targets for such expansion? And, how will your company manage these far-off locations and operations? The answers lie in a centralized technology solution that enables end-to-end financial, inventory, and supply chain management—all from a single, cloud-based platform. Whether they’re assembling products in Hong Kong, packaging goods in London, or distributing products in the U.S., all departments can work from the same playbook and follow the same protocols.
- Make sound decisions on the fly. With new tariff announcements being made almost daily, companies impacted by those fees are being thrown into a state of panic that simply isn’t healthy for their business. Held back by their on-premise software solutions—most of which provide very little visibility, have no collaborative capabilities and lack state-of-the-art functionalities (like mobile apps)—these companies simply can’t turn on the dime. Add a robust, cloud-based supply chain platform to the mix, however, and those challenges will quickly be turned into opportunities. A distributor that’s exploring new markets in order to offset proposed tariffs, for example, can be up and running in that new country quickly and painlessly. Without a flexible system in its corner, the same distributor will be forced to allocate additional time, money and energy to spinning up that new overseas location.
- Utilize flexible budgeting and planning processes. Flexible business planning and budgeting processes are mandatory when you’re operating in a tumultuous trade environment. For example, companies need to understand how a new or increased tariff will impact its cost of goods, cost equations and other important measures. A 25 percent uptick in steel tariffs, for example, could translate into a substantial change to a firm’s cost of doing business. (If 2018 steel imports equal those of 2017, for instance, these tariffs could wind up costing U.S. firms about $9 billion.) Businesses armed with a technology platform that allows for rapid response to changing market dynamics will be well positioned to make those critical budgeting and planning decisions while ensuring the lowest possible impact on valued customers — and the bottom line.
Put the Cloud in Your Corner
The importance of keeping informed and staying flexible can’t be overstressed in today’s trade environment, where both proposed and retaliatory tariffs can severely impact a company’s ability to stay profitable, viable and on a growth path.
By bringing together people, products, capacity, costs, revenues, forecasts, and sales onto a single platform, NetSuite serves as a great enabler for anyone who works with international business partners and customers.
If tariffs are starting to drive you to put more thought into your international business operations—or, if you’re ready to accelerate your firm’s global expansion plan—it’s easier to do with a cloud-based platform like NetSuite in your corner.
Learn how to take a supply chain from tactical implementation to strategic integration.